⪠In unilaterally âcancelingâ up to $20,000 in student loan debt for borrowers earning less than $125,000 annually, the Biden administration on Wednesday has put into motion a plan that will further inflate college costs, hinder economic growth, reward upper-income earners, and provide a major handout to woke institutions of higher education...
The Biden Administration has stuck its thumb in the eye of the millions of working Americans who donât hold college degrees but who will still bear the cost of this latest federal largesse. The administration is also rubbing salt in the wounds of those responsible borrowers who worked their way through college to avoid debt or who worked hard to pay off their college debt after graduating.
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The millions of Americans who graduated from college, lived modestly without fancy dinners and vacations for years so they could diligently repay the debt they accepted are surely wondering now why they will get no such rebate.
Those responsible Americans are left standing there, holding the bill like chumps; and, they have every good reason to feel insulted.
So should the Americans who eschewed college altogether because they thought it was a bad value propositionâwhich the Biden Administration has tacitly admitted through this very move to cancel debt.
The plan is an blatantly unfair & irresponsible handout to Big Education (which will gladly keep raising tuition) and a politically favorable constituency of relatively wealthy, more highly educated voters.
The debt cancellation includes household incomes of up to $250,000, while the current national median family income is only $80,000.
Bidenâs boondoggle bailout will also, as Clinton-era Treasury Secretary Lawrence Summers recently pointed out, have both macro (whole-of-economy) and micro (tuition prices) inflationary effects. History demonstrates that federal subsidies have enabled colleges to raise their prices with abandon. Since the 1991-92 academic year, total federal aid (including student loans and grants) has increased 295%.
In response, colleges and universities more than doubled their tuition and fees in real terms.
Penn Wharton estimates the loan cancellation will cost at least $300 billion, with about 70% of the forgiveness going to the top 60% of households by income distribution. In addition, every month federal taxpayers are losing $5 billion in accrued interest as a result of the separate, ongoing repayment moratorium.
All of this makes extending the pause on repayments Biden also announced Wednesday just another equally bad policy decision.
According to the Committee for a Responsible Federal Budget, higher-income earners, such as doctors and lawyers will benefit the most from the continued repayment pause,. Law-degree holders will also receive an estimated $29,500 in âforgivenessâ through policies like canceled interest resulting from the pause. Holders of medical degrees have already received a staggering average of $48,500 in debt âcancellationâ resulting from the pause.
The Committee for a Responsible Federal Budget  estimates that if the pause were to continue through August 2023, doctors and lawyers would accrue respective total benefits of $89,500 and $54,500 per person.
Of course, those are the professionals who are most able to repay their student loans.
Itâs true that student loan debt is high in aggregate terms. Federal student loan programs account for most of the $1.7 trillion in outstanding student loan debt. However, for most borrowers the median monthly loan payments, which are $222 per month or under $2,700 per year, remain manageable. If they arenât, even better repayment options already exist.
Indeed, about half of all loans issued through the Federal Direct Loan Program are currently being repaid through Income-Driven Repayment plans, which cap monthly loan payments based on income.
By definition, those plans are affordable. Notably, for those borrowers, the âforgivenessâ scheme lopping off $10,000 (the most someone can get if he or she had no Pell grants) isnât likely to help much at all. Low and middle income borrowers enrolled in income-driven repayment plans make minimal payments, and ultimate forgiveness is already baked into the plans, so lopping off $10,000 of their loan balance doesnât actually end up providing any relief benefit to them.
Loan forgiveness ultimately rewards the bad behavior of universities while punishing working Americans who didnât want to, or for whatever reason couldn’t pursue a college degree. When colleges raise tuition knowing easy government money will allow them to charge more and more, they do not put that money into faculty salaries; but instead, to a large measure, into a growing army of âdiversity, equity, and inclusionâ officers and other administrative busybodies. One of the worst offenders, the University of Michigan, employs 163 people for diversity, equity, and inclusion programming services.
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As the Independent Womenâs Forumâs Inez Stepman said, the plan ârobs the working classâ to provide a âbailout for the woke managerial class.â
This bailout will also created intractable policy puzzles going forward. What happens to the next cohort of borrowers, currently signing on the dotted line for their student loans as the academic year begins? An older sister gets $10,000 or $20,000 off, while her younger sister does not. The potential moral hazards are massive.
Students will also understandably expect their loans to be forgiven going forward, and that expectation could lead to increases in borrowing and decisions to delay payment.
Past borrowers who repaid their debt have been handed an unfair bill for someone elseâs loan. Future borrowers: children currently in elementary and secondary school, can expect even higher college costs later as a result of this âforgiveness.â
It would be difficult to design a more unfair, regressive & inflationary policy if you tried. âŞ
âśď¸ 12 Minutes 10 Seconds âď¸ Gary Brown
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âśď¸ 11 Minutes 59 Seconds âď¸ warpmine of Clovis
